Available Federal Programs
– as of 3/30/2020
Small Business Loan Program
The legislation allots $380B in loans and grants from the SBA. $349B is available through 7(a) loans from the SBA for the Payroll Protection Program. An additional $27B was added in emergency grants to aid in servicing existing SBA loans.
- In addition to traditional small business (<500 employees), assistance will be extended to non-profits, sole proprietors, independent contractors, self-employed individuals and “gig” workers with additional coverage for hospitality / food industry.
- The program is retroactive to February 15 and runs through June 30.
- Companies will be eligible for loans equal to 2.5x an employer’s average total monthly payroll costs up to a $10MM.
- Payments can be deferred and forgiven under the program.
- Federal agencies, including the SBA and the Treasury, will issue regulations to implement the Payroll Protection Program and the SBA is required to issue regulations under emergency rulemaking authority by April 11, 2020.
Cash Payments for Individuals
Treasury will issue payments to individuals as a rebate for the 2019 tax year. Parameters include:
- Individuals making up to $75,000, heads of households up to $112,500 and joint filers up to $150,000 will receive a $1,200 check, or $2,400 in the case of a joint return. Children of qualifying individuals / families will also receive $500.
- Phase out begins above $75,000 / $150,000 so that payments would decrease at a rate of $5 for every additional $100 in income.
- Payments cease at $99,000 individual / $198,000 joint filer threshold.
Expanded Unemployment Benefits
The bill provides for $600 weekly payments in addition to regular unemployment compensation, for up to four months through July 31, 2020. Individuals may not receive more than 39 weeks of combined unemployment assistance between state and local resources for this year. This additional benefit is only available between January 27, 2020 and December 31, 2020 unless extended.
SBA Paycheck Protection Program
The Paycheck Protection Program provides small businesses with zero-fee loans of up to $10 million to cover payroll and other operating expenses. Up to 8 weeks of payroll, mortgage interest, rent, and utility costs can be forgiven. Payments on principal and interest are deferred for one year. More information on this program is available here.
SBA Economic Injury Disaster Loans
The CARES Act creates a new emergency grant of $10,000 for small businesses that apply for an SBA economic injury disaster loan (EIDL). EIDLs are loans up to $2 million with interest rates of 3.75% for businesses and 2.75% for nonprofits, and principal and interest payments deferred up to 4 years. The EIDL loans may be used to pay for expenses that could have been met had the disaster not happened, including payroll and other operating expenses. The EIDL grant does not need to be repaid even if the applicant is denied an EIDL. A small business may apply for an EIDL grant and a Paycheck Protection loan. The EIDL grant will be subtracted from the amount of the Paycheck Protection loan that is forgivable. More information on this program is available here.
Debt Relief for New and Existing SBA Borrowers
For small businesses that already have an SBA loan (such as a 7(a), 504, or microloan) or take one out within 6 months after the CARES Act is enacted, the SBA will pay all loan costs for borrowers, including principal, interest, and fees, for six-months. SBA borrowers may also seek an extension of the duration of their loan and delay certain reporting requirements. More information on this program is available here.
Employee Retention Tax Credit
The CARES Act creates a refundable payroll tax credit for businesses, large and small, that retain their employees during the COVID-19 crisis. Employers are eligible if they have been fully or partially suspended as a result of a government order, or they experience a 50% reduction in quarterly receipts as a result of the crisis. For employers with 100 or fewer full-time employees, they may claim a credit for wages paid to all of their employees, up to $10,000 a person. For employers with more than 100 employees, they may claim a credit for those employees who are furloughed or face reduced hours as a result of the employer’s closure or economic hardship. The Department of the Treasury is authorized to advance payment of the employee retention tax credit. This tax credit is not available if the employer takes an SBA paycheck protection loan. More information is available here.
Payroll Tax Delay
The CARES Act allows employers to delay paying the employer-portion of payroll taxes through the end of 2020. The deferred amount is due in two installments – 50% is due before December 31, 2021, and the other 50% is due before December 31, 2022. Deferral is not available if the employer takes an SBA paycheck protection loan. More information is available here.
Advance Payment of Tax Credits for Paid Leave
The CARES Act allows the Treasury to send advance payments of tax credits available to employers that are required to provide up to 12 weeks of coronavirus-related paid leave to their employees. More information is available here.
Business Tax Relief
The CARES Act provides other forms of tax relief for businesses, including loosening requirements for net operating losses, and limitations on business interest deductions. The CARES Act also permanently fixes the qualified improvement property (QIP) error in the 2017 tax law, so that QIP investments are entitled to 100% recovery over 15 years. Distillers are exempt from excise taxes on undenatured alcohol for the purpose of producing hand sanitizer. More information is available here.